Since June 2016 the uncertainty surrounding Brexit has weakened the pound and turned the UK stock market into an uncertain place for investors. Over this period the FTSE 100 index has lagged the MSCI World index by 2.1% a year and experienced around 10% more volatility.
In the present low-interest rate environment, many income-seeking investors have been forced to take more risk by moving out of bonds into stocks. And this is no surprise, when you consider the extra yield they can earn by investing in the FTSE 100 index, currently 4.5%, compared with gilts (0.7%) or a diversified basket of sterling-denominated corporate bonds (2%).
Sustainable investing is not just about buying ‘green’ and avoiding ‘sinful’ stocks; it’s also about recognising that sustainability issues can influence a company’s performance. It makes sense to consider environmental, social and governance (ESG) factors when investing, particularly if you have a long-term perspective.
It’s hard to think of another event in recent memory causing more uncertainty for UK businesses than Brexit. Following the vote in June 2016, the FTSE All-Share index has underperformed the global benchmark MSCI World by 6.3% in annualised terms.
Some argue this makes UK companies a prime objective for bargain-hunters. However, investing in businesses that are particularly reliant on the health of the British economy remains a risky bet.
The taxation of investments is a complex matter, but this shouldn’t stop investors from carrying out basic due diligence during the exchange traded fund (ETF) selection process to avoid unwelcome effects on returns.
UK investors have access to a wide array of ETFs listed on the London Stock Exchange. But being listed on the local UK exchange is no guarantee of tax efficiency. Some of these ETFs are listed in London just because it is the trading venue of choice for many international investors, so these ETFs may have been initially designed to suit the needs of non-UK investors.
Global small-cap stocks have caught the eye after trouncing their mid- and large-cap counterparts by 2.5 per cent a year on average over the past decade. However, while returns have been impressive, they have been accompanied by higher levels of risk, with small caps registering a standard deviation almost 15 per cent higher than larger caps over the same period.
Dimitar Boyadzhiev explains how and why value investors looking for bargains might profit from setting their sights on an ETF.
Dimitar Boyadzhiev explains the importance of looking under the bonnet of your chosen ETF.